Stocks finished slightly in the red Friday after a number earnings reports from major companies ushered in big value swings especially in the tech sector. As had been the case in many recent weeks, the rise and fall of big tech stocks largely dictated the pulse of the market.
The Dow Jones industrial average was down 0.4% for the week, closing at 16,361 points, while the S&P 500 lost 0.1% to 1,863 points and the Nasdaq finished 0.7% in the red at 4,076 points.
Among the biggest losers of the week was Amazon.com. Despite announcing a content licensing deal with HBO Wednesday and posting better than anticipated revenue and profit numbers on Thursday, Amazon shares finished the week down 6.7%. The stock ticked up after its closing bell earnings report but a sell-off began overnight and continued through much of the day Friday. The stock ultimately shed 9.9% Friday and closed at $303.83. FORBES Markets Reporter Brian Solomon explained,
In what initially seemed like a gangbuster first quarter earnings report, Amazon showed nearly $20 billion in revenue, beating the analyst consensus estimate as sales rose 23% from last year. The company also eked out a small net income improvement — to $108 million from $82 million.
But Amazon’s guidance scared investors. While net sales are expected to grow between 15% and 26% compared to 2013, Amazon admitted they expect a return to the red — with an estimated operating loss between $455 million and $55 million.”
In a way Amazon’s performance in the late week was a replay of the drama Netflix suffered just a few days earlier. Shares of the video streaming company popped after it reported better than anticipated earnings Monday. In a letter to shareholders on the results Netflix CEO Reed Hastings and CFO David Wells declared war on HBO. Two days later HBO fired the first shot with its Amazon deal. The hit brought Netflix down and it did not recover by close Friday, ultimately finishing the week down 6.5% at $322.08
Wednesday Facebook, another fan favorite, reported $2.5 billion in revenue, $642 million in net income and earnings per share of 25 cents. All results were far ahead of the same period a year ago and a friendly beat over Wall Street analysts’ expectations. FORBES Tech Contributor Robert Hof reported that the surprisingly strong numbers were due to tremendous growth in mobile ad sales from 30% of total ad sales a year ago to 59% last quarter. Hof wrote,
The results seem almost superfluous in a quarter when Facebook spent $21 billion to buy text message firm WhatsApp and virtual reality startup Oculus VR–except that Facebook’s profits and growth are precisely what allows CEO Mark Zuckerberg to spend big on what he hopes will be the company’s future. The strong quarter should allow him to continue to do just that.”
Nevertheless the social network closed the week down 3.1% at $57.71. The stock opened in the green the morning after earnings before shedding a combined 9.3% on Thursday and Friday. Many market watchers believe those acquistions are a part of the problem, as they worry Instagram is not delivering on Facebook’s $1 billion investment quickly enough.
Microsoft also closed the week down,but by only 0.4% at $39.91 with a modest earnings beat Thursday night pulling the company out of a mid-week slump. People seemed most impressed that new CEO Satya Nadella took part in the earning conference call, something predecessor Steve Ballmer avoided at all costs.
The real tech standout was Apple, which closed trading for the week up 8.7% at $571.94 after announcing strong earnings and plans to return $130 billion in cash to investors, as well as a 7-for-1 stock split. FORBES Markets Editor Steve Schaefer wrote,
The split does nothing to change the value of Apple’s shares — 7 shares at $75 apiece are worth the same amount of money as one share at $525 — but could make Apple shares more accessible to individual investors who can’t pony up hundreds of dollars for a single share of stock. That argument loses steam though when considering that retail brokerages like TD Ameritrade often report Apple is among the most widely-traded stocks by clients.”
Outside the tech sector airlines reported mixed earnings results and stock prices to match with Delta finishing the week up 7.5% at $36.o7 while United Continental was down 8.8% at $39.41. General Motors and Ford both finished the week lower after earnings, down 0.4% and 1.8% respectively. Visa shares also finished the week down 4.9% at $198.93 after the company reported weaker than anticipated earnings.
Next week is another busy one for corporate earnings reports with Twitter, LinkedIn, eBay, 3D Systems, Merck, MasterCard and others reporting.